Thousands of SMEs are being put off applying for finance due to complicated business terminology, new research shows.
A wide-ranging survey of small business bosses showed that just under two in five Yorkshire decision makers cited the language used by lenders as having put them off applying for finance.
Despite this, however, Yorkshire SMEs are among the least likely in the UK to be turned down for finance, with just 37.5 per cent having had applications rejected by lenders.
Manufacturers in particular are affected by the issue of finance, with many reporting difficulty in obtaining finance to grow their businesses.
The research, compiled by LDF, also showed a vast regional disparity in Yorkshire, with almost half (49.1 per cent) in Leeds having been deterred from seeking finance to just over a quarter in Sheffield.
Terms that proved most off-putting to bosses included COGS (Cost of goods sold) ROCE, return on capital employed) with 37.5 per cent and 35.4 per cent of those surveyed admitting they did not understand the terms.
Elsewhere, the LDF research showed that more than half of Yorkshire SME owners feel that the approval time, or time taken to receive money, has had a negative impact on their business, manifesting itself in 19 per cent being unable to pay their suppliers and 15 per cent losing business. Among Leeds SMEs specifically, 24.2 per cent didn’t pay themselves and 15.2 per cent incurred interest charges.
Among Leeds SMEs specifically, 24.2 per cent didn’t pay themselves and 15.2 per cent incurred interest charges.
This also had an emotional impact with 61.5 per cent of SME owners across the region saying that it made them feel stressed.
“It’s disappointing, but perhaps not surprising, that almost 40 per cent of SMEs in Yorkshire are put off applying for finance by the terminology used,” says Peter Alderson, managing director of LDF.
“Despite them being among the least likely in the UK to be put off, the number is still too high.
“For many, running a small business is a challenging, all consuming activity, so complicated financial jargon and acronyms are just extra barriers in the way of their success. At LDF, we are committed to making not just the terminology of finance, but access to it, as easy and trouble-free as possible.”
On a more positive note, 39.6 per cent of Yorkshire SME owners see taking out business finance as a necessary part of business growth although a quarter still think that it has a negative stigma attached.
Of those with a negative view on business finance, more than half said it was because it made it sound like your business was struggling to make ends meet and almost a third feel that finance providers offer a poor service or are too difficult to deal with.
When asked whether they had made a poor financial decision in the last 12 months, just 29.2 per cent admitted they had, with many of them saying that it was caused by not taking on enough funding.
The research was conducted by Opinion Matters for LDF at the start of the year and sampled more than 500 business across a variety of sectors.